Splash Damage has eight number one hits. It’s never laid off a single employee. And over the past eight years, it’s never missed a milestone.
Studio founder Paul Wedgwood wants to share that success with other developers. After selling his company in 2017 for $160 million to Hong Kong company Leyou and leaving Splash Damage entirely in 2018, he’s recently announced the founding of Supernova Capital, a private equity firm.
Outside financing is often a double-edged sword. The cash can give growth-ready studios the boost they need to pursue ambitious projects. But the wrong funder can impose itself on the creative vision, ultimately diluting or destroying the reasons investment was warranted in the first place.
Supernova wants to buck this trend by becoming a transformational investor. Wedgwood and his five partners (including Microsoft’s Mark Morris and a quartet of Splash Damage executives) aren’t just bringing their financial assets to the table. Supernova is only interested in acquisitions and won’t consider minority investment. Wedgwood and his team also have one uncommon condition worked into the deal: the studio has to be ready to go through Supernova’s leadership coaching program, Titan.
The 49-part program is a result of Wedgwood’s experience taking Splash Damage to the brink of failure and pulling it back from the edge. The studio nearly went bankrupt and was suffering from massive turnover, losing 40 employees after it shipped the multiplayer portion of “Batman: Arkham Origins.” Wedgwood knew that something needed to give.
“I caused those problems,” Wedgwood told Variety. “You learn pretty quickly that most people that achieve in life do so at a point of absolute existential crisis. In the very depths and worst and darkest moment of their life that they let go of everything and suddenly they become liberated and live in the moment.”
In Wedgwood’s moment, he realized that Splash Damage was going through a series of crises. He had taken on too much himself, wasn’t delegating, and when he started to bring people on, there was worry about control and bureaucracy. The company was growing, but it hadn’t managed that growth in a way that was sustainable and healthy.
It took Splash Damage nearly seven years after its 2001 founding to bring on someone with business experience to help take those tasks off Wedgwood’s plate. Even then, it was a contractor coming in one day per week to help with the books. From there it was getting the cash flow under control and focusing on what made Splash Damage’s culture unique.
“If you work through a series of facilitation exercises to understand what your values are—and I don’t mean the ones that people stick on their lobby wall as soon as they walk into the studio, like honesty, integrity, customer service, cause that’s bull, and we know they are—but honest ones,” Wedgwood says. “Ours were like arrogance and nepotism. You can spin them a bit. In the end, we said it’s ‘self-mastery’ and it’s ‘loyalty and friendship’ and ‘team play’ and ‘a can-do attitude.’ When you understand the shared values of the studio and you start to recruit for them… you improve the morale of the studio because the first thing that improves morale in the studio is wanting to go to work with your colleagues.”
Splash Damage put its focus on helping employees feel empowered and happy to be at work. Unifying around core values led to improved morale, which in turn increased productivity.
In order to monitor the progress, Wedgwood used an engagement tool called Net Promoter to take his staff’s pulse. Each month, Splash Damage employees were asked to rate how likely they would be to recommend working at the company to others.
“We fixed every detractor problem,” Wedgwood says. “These are the things that people are talking about in the lobby, or in the car park, in the hallways when they’re moaning and groaning, bringing everybody else down. If you’ve fixed those things to quiet the detractors, more passives become promoters and the buzz grows again within the organization.”
Wedgwood is putting his coaching philosophy to work with Supernova’s first acquisition, “Shadow Warrior” and “Hard Reset” developer Flying Wild Hog. The Polish company has been operating since 2009 and has since grown to include three locations and 180 employees, all while resisting crunch culture.
“We wanted to find somebody to help us grow the company and make better projects,” says Flying Wild Hog CEO Michał Szustak. “We had this fear that we were going to have to sell the company to an investment fund or bankers or a publisher. It was scary for us.”
Flying Wild Hog needed to get away from its previous investor, which was looking to maximize profits rather than foster a healthy work environment. The studio was starting to stagnate and needed Supernova to help it get past the plateau.
At the same time, Supernova needed a studio willing to partner up and be the test case for the Titan leadership program to refine it for future studio acquisitions. Titan gradually eases studio executives into best practices and creating long-term solutions instead of dealing with short-term emergencies. Wedgwood likens this to putting out fires by installing a sprinkler system that can react over and over rather than using an extinguisher.
Studios like Flying Wild Hog that partner with Supernova will have autonomy and creative direction, but handing back financial management is a stepped process. “The financial engine side of what we do is pretty technical and it’s probably the hardest thing to teach studio leadership how to do,” Wedgwood explains. “So we do it for them until they’re up to speed.”
Currently, Supernova is holding Flying Wild Hog’s purse strings. Szustak lets Wedgwood know how much money he needs and Supernova releases the funds (potentially hundreds of thousands of dollars at a time).
“That’s how we work,” Wedgwood says. “It’s just easier by like that at the moment, but when he gets the time and as we integrate the finance team within the studio and the other bits and pieces, we’ll start leveling up that aspect of the business. That’s the last chapter before the end.”
As part of the financial training, Supernova wants studios to start building a rainy day fund. At first, studios will have a one-month reserve fund, but the idea is to get to the point where Supernova-owned companies have a full year in the bank in case of emergency.
Another piece of what Wedgwood calls the “financial engine” coaching is building in revenue sharing and royalties. While Flying Wild Hog will have final say on whether this is implemented, Supernova suggests that 10 percent of royalty checks get distributed amongst staff and that 1 percent of revenues make their way into employee paychecks.
“When you do that and staff see that line in their payroll, it might only be a few hundred bucks at first,” Wedgwood says. “But when it goes from $300 to $350 to $400 to $500, $600.. it’s so nice to reward people properly for what they do and for them to see a direct correlation between the revenue that the business is making and it ending up in their payroll. To some degree, there’s a bit too much progressive business thinking and people forget that part of the human drive is still to be able to buy a nice car.”
Supernova is hopeful that its first investment is going to yield big rewards. Wedgwood and Szustak are projecting that Flying Wild Hog will quadruple its profits in the first year of the relationship. The target for year two is a ten-fold increase.
But despite the dividends the investments may pay, Wedgwood comes back to the core reason he founded the firm: making employees happy, which in turn increases morale and productivity.
“It almost doesn’t matter at all if your ulterior motive is actually to make money,” he explains. “If you’ve found a way to do it by making people happy, that’s fine with me.”